RBS 2008 Annual Report Download - page 162

161RBS Group Annual Report and Accounts 2008
Details of pension arrangements of directors are shown on page 168.
Where cash allowances are paid in place of pension accrual (or of
pension accrual on salary over the pension earnings cap), they are
shown on page 164. Executive directors also receive cover for death-in-
service benefits.
For all executive directors joining on or after 1 October 2006, pension
provision is in the form of a pension allowance which may be used to
participate in The Royal Bank of Scotland Group Defined Contribution
Pension Fund which is open to all employees, or to invest in alternative
pension arrangements, or to take all or some of the allowance in cash.
In addition, as employees, executive directors are eligible to participate
in Sharesave and Buy As You Earn schemes. These schemes are not
subject to performance conditions since they are operated on an all-
employee basis.
Annual incentives
No annual incentive has been awarded to any executive director in
relation to 2008 performance.
UK-based executive directors have a normal maximum annual incentive
opportunity of between 160% and 200% of salary (with an exceptional
maximum opportunity of 200-250% of salary). The on-target opportunity
is 107% to 133% of salary.
The Remuneration Committee has determined that, for the financial year
ending 31 December 2009, the exceptional maximum incentive
opportunity will not be available.
Any annual incentive payments earned in 2009 will be deferred and
released in equal annual instalments over three years. The Remuneration
Committee will reserve the right to review performance prior to each
element of deferred incentive vesting and reduce the proportion that
vests if there is evidence that the financial performance for 2009 was
materially inaccurate or there is a material loss or reputational damage
as a result of activity during the deferral period.
Any incentive payments to executive directors in 2009 will reflect
performance across five performance categories: Strategic Direction,
Finance and Operations, Stakeholders, Efficiency and Control and
Capability and Development. Group business unit and functional
performance will be considered as appropriate.
Long-term incentives
The company provides long-term incentives in the form of share options
and share or share equivalent awards. Their objective is to encourage
the creation of value over the long term and to align the rewards of the
executive directors with the returns to shareholders. The Remuneration
Committee is formulating proposals under which awards may be made
in the future under two plans; the Medium-term Performance Plan and
the Executive Share Option Plan. Any awards will be subject to rigorous
performance conditions on which shareholders will be consulted.
Medium-term Performance Plan
The Medium-term Performance Plan was approved by shareholders in
April 2001. Each executive director is eligible for an annual award under
the plan in the form of share or share equivalent awards. Whilst the
rules of the plan allow awards over shares worth up to one and a half
times earnings, the Remuneration Committee has adopted a policy of
granting awards based on a multiple of salary. No changes will be
made to this policy without prior consultation with shareholders.
The award levels for 2009 will be reduced from the policy applied for
awards in 2008.
Options
The Executive Share Option Plan was approved by shareholders at the
company’s 2007 Annual General Meeting.
In 2008, options were granted to executive directors under the
Executive Share Option Plan approved by shareholders in 2007, over
shares worth between one and a half times salary and three times
salary. For 2009, the award levels will be reduced from the policy
applied in 2008.
Shareholding guidelines
The Group operates shareholding guidelines for executive directors. The
target shareholding level is 200% of gross annual salary for the Group
Chief Executive and 100% of gross annual salary for executive
directors. Target shareholding levels are determined by reference to
ordinary shares held, together with any vested awards under the
Group’s Medium-term Performance Plan. Executive directors have a
period of five years in which to build up their shareholdings to meet the
guideline levels.
Group Chief Executive – Stephen Hester
Stephen Hester became Group Chief Executive on 21 November 2008.
His annual basic salary is £1,200,000.
Mr Hester also received certain share awards on appointment as Group
Chief Executive and share awards to replace bonus and share awards
he forfeited on leaving The British Land Company PLC. Mr Hester was
granted conditional share awards over a total of 10,407,081 shares.
Subject to their terms, the majority of these awards will vest between
February 2009 (immediately after the announcement of the 2008 annual
results) and the third anniversary of his appointment as Group Chief
Executive.
Chairman – Philip Hampton
Philip Hampton became Chairman-designate on 19 January 2009, and
Chairman on 3 February 2009. His fee is £750,000 per annum. He will
also receive a one-off restricted share award over shares in the
company which will vest, subject to the satisfaction of appropriate
performance conditions, on the third anniversary of the date of grant.
The amount of this award will be two times his annual fee, based on the
share price at the date of grant.
Former executive directors
Sir Fred Goodwin
Sir Fred Goodwin’s employment with the company ended on 31 January
2009. Under the terms of an agreement reached on 13 October 2008,
he has waived any payment in lieu of notice and his rights in respect of
unvested executive share options and unvested awards under the
Medium-term Performance Plan have lapsed. He will not receive a short
term incentive payment for the financial year ended 31 December 2008.
Johnny Cameron
Johnny Cameron’s employment with the company will end on 28
February 2009. Under the terms of an agreement reached with him on
19 December 2008, he will not receive pay in lieu of notice or short
term incentive payments for 2008 or 2009.
Mark Fisher
Mark Fisher’s employment with the company will end on 6 March 2009.
He will not receive any short term incentive payment in respect of either
2008 or 2009.